Raj Kumar Soni vs The Managing Director and Another

Satish K. Agnihotri, J.—By this petition, the petitioner seeks setting aside the entire proceedings which led to the grant of lease to respondent No. 2, in respect of Plot No. 2 F, in Sector C, Sirgitti Industrial Area, Tifra Bilaspur, including the lease agreement entered into by and between the respondent No. 1 and 2. The petitioner further seeks a direction to restore the possession of the aforesaid plot to the petitioner, with all its structures and buildings. The facts, in brief, as projected by the petitioner, are that a plot of land on lease for 99 years was allotted to the petitioner by the then M.P. Industrial Development Corporation, in the Industrial Area, Sirgitti, Bilaspur after executing a lease deed on 25.06.1997. Thereafter, the petitioner constructed a compound wall all around the land of 15000 sq. ft. and a factory building on 2000 sq. ft. of the land. Due to paucity of fund, the petitioner could not start his business in the said factory, however, the petitioner was regularly paying the annual rent, rates, taxes and other admissible charges as per the lease agreement. The petitioner submitted applications for extension of time for starting the industry as he could not start production as per the terms of the lease, which stipulated that small scale industry within three years, and medium scale industry, within five years, must start the production from the date of allotment. Earlier, at one point of time, the lease agreement was terminated by the order of the respondent No. 1 on 10.02.2006, against which the petitioner preferred an appeal before the appellate authority, in which six months time was granted for starting the production, by order dated 10.02.2006 (Annexure P/3). Even then, the petitioner could not start production in his factory for one or the other reason and again prayed for extension of time vide communication dated 01.03.2006 (Annexure P/4). The petitioner did not pay the lease rent for the year 2006 on account of termination of the lease agreement, however, later on the lease rent for the year 2006 and 2007 was paid by the petitioner. The respondent No. 1, by letter dated 26.04.2007, referring the letter dated 28.07.2006, directed the petitioner to hand over the possession of the lease hold. In response, the petitioner submitted that he had already spent an amount of Rs. 8 lakhs and therefore, he asked for extension of time by six months vide communication dated 03.05.2007 (Annexure P/8). The respondent No. 1 also issued a notice dated 29.09.2007 under clause 28 of the lease agreement informing the petitioner, that after expiry of three months, the lease hold property alongwith all its structures would vest in the respondent No. 1 and thereafter, they would be free and authorized to take appropriate action in regard to the said property. Another notice was issued on 07.04.208 referring the aforesaid clause. However, no effect was given to the aforesaid notices by the respondent No. 1 and even the lease rent paid by the petitioner for the year 2008 was accepted by the respondent No. 1.

Shri Nair, learned counsel appearing for the petitioner, submits that though, the lease agreement was terminated in the year 2006, however, the lease survived as the respondent No. 1 had granted extension of time on the request of the petitioner and even the lease rent was accepted by them. The petitioner had also moved an application under clause 28 of the lease agreement on 23.10.2010 (Annexure P/12) that since he wanted to avoid any dispute with the respondents and at the same time, wanted to get back the money he had invested, informing that he intends to transfer the structures and buildings he had built on the said land to Shri Navin Sahu, who has agreed to take it and pay the petitioner the amount of investment he has already made, and requested for grant of permission to do so. The said letter was not acted upon by the respondent No. 1. Later on, the plot allotted to the petitioner was allotted to the respondent No. 2. On having come to know about the said fact, the petitioner approached the authorities of the respondent No. 1. Thereafter, the petitioner was dispossessed from the plot in dispute in a high handed manner on 16.03.2011. A police complaint was also lodged by the petitioner.

Shri Nair would further submit that the action of the respondent No. 1 in allotting the plot in dispute, when the petitioner has been paying the annual rent and the same was duly accepted by the respondent No. 1, in such event termination of the lease agreement was bad in law. Even the action of the respondent No. 1 in dispossessing the petitioner from the plot in dispute and thereafter, allotting and handing over the possession of the plot to the respondent No. 2 is unjust, illegal and arbitrary. There were other vacant plots available in the Sirgitti area which could have been allotted to the respondent No. 1, but the respondent No. 1, in an illegal manner, has allotted the said plot to the respondent No. 2.

On the other hand, Shri Naved, learned counsel appearing for the respondent No. 1 would submit that as per clause 6 of the lease agreement dated 25.06.1997 (Annexure P/2), the petitioner was required to commence production in his unit within a period of one year, in which the petitioner miserably failed. The petitioner was served with a notice on 18.09.2001 calling upon the petitioner to commence production within a period of 15 days. The petitioner responded that his unit would commence production in the last week of November, 2001 by letter dated 29.09.2001. Thereafter, the petitioner, by communication dated 16.07.2003 was directed to produce evidence regarding commencement of production, and this time also, the petitioner requested for extension of time by letter dated 25.07.2003. Similarly, time and again, the petitioner was asked to commence production in his unit but the petitioner failed in doing so. Thus, the respondent No. 1 was constrained to cancel the lease agreement on 10.02.2006 (Annexure R-1/4). However, on an appeal filed by the petitioner, in order to promote entrepreneurship, the petitioner was granted further six months time to start the production, but even then, the petitioner could not start production in his unit. The petitioner, by communication dated 28.07.2006 was informed that if the petitioner fails to commence production within the further extended period of six months, the order dated 10.02.2006 shall become operative. Instead of commencing production, the petitioner again requested for grant of six months time by communication dated 03.05.2007. Ultimately, the respondent No. 1 by communication dated 20.09.2007 and 07.04.2008, directed the petitioner to remove all his belongings and hand over the possession of the plot back to the CSIDC, failing which as per the terms of the lease agreement, shall be deemed to be revered back to CSIDC.

Shri Naved would further submit that for umpteen number of times, the petitioner was given fair opportunity to start his production, however, instead of commencing production in his unit, kept on requesting for extension of time. Thus, on 01.12.2010, a panchnama was drawn and possession was taken back from the petitioner by the officials of the CSIDC. So far as contention of petitioner that the respondent No. 1 had accepted the lease rent even after cancellation of the lease deed is concerned, it is for him to pay the lease rent till possession continued with him. The nature of relationship between the petitioner and the respondent No. 1 is statutory and are governed under the special statue i.e. the Chhattisgarh Industries (Allotment of Sheds, Plots and Land) Rules, 1974 (for short ''the Rules, 1974'') and the action of the petitioner would be governed under the said Rules, 1974. Thus, payment of lease rent after the period of cancellation of the lease agreement would not operate as acquiescence against the respondent No. 1. The petitioner has tried to mislead the court by putting incorrect facts, thus, on this count also, the petition deserves to be dismissed.

Ms. Singhai, learned counsel appearing for the respondent No. 1, in addition to the above, would submit that a letter of intent was issued by the Executive Director, CSIDC for allotment of the land in favour of the respondent No. 2. The terms and conditions were accepted by the respondent No. 2 and on 10.01.2011, the allotment order was issued in favour of the respondent No. 2 and further, on the basis of the said order, a lease deed was also executed between the respondent No. 1 and 2. In fact, after possessing the land by the respondent No. 2, the petitioner has tried to illegally occupy the plot which was handed over to him by respondent No. 1 in a legal and proper manner. A police complaint was made against the petitioner and with the help of the police and the Tahsildar, Bilaspur, the possession of the plot was restored to the respondent No. 2. The petitioner had failed to comply with the terms and conditions of the lease agreement executed between him and the respondent No. 1, thus, as per the conditions of the lease agreement itself, his allotment was cancelled.

Heard learned counsel appearing for the parties, perused the pleadings and documents appended thereto.

Indisputably, the lease deed was executed between the, then Government of Madhya Pradesh acting through the respondent No. 1, and the petitioner on 25.06.1997 for a period of 99 years ending on 24.06.2096 for the purpose of construction and establishing thereon a factory for the manufacture of Coal Briquettes and purpose ancillary thereto.

Clause 6 of the agreement provides that the lessee agrees that he shall, within a period of one year, in case the small scale industry, and within a period of three years, in case of large and medium scale industry, from the date of his taking possession of the land, implement the project and go into production.

Clause 27 of the agreement provides that on expiry of the lease period or termination of the lease due to breach of the conditions of the lease deed or surrender of land after the execution of the lease deed, the lessor shall have the right of re-entry over the land/premises. On such re-entry, the lessor may refund to the lessee the premium/cost of acquisition paid by the lessee at the time the land was allotted/leased out to the lessee in the manner prescribed in the agreement.

Clause 28 of the agreement provides that on termination/surrender of the lease, the lessee shall be given an opportunity to transfer or otherwise dispose off the building, plant and machinery and any other construction on the said premises within the period of three months a manner acceptable to the lessor. After the said three months period, the lessor shall be free to dispose of all the property left over by the lessee over the plot.

The allotment of plot/land for the industrial purpose is governed under the rules namely The Madhya Pradesh Industries (Allotment of sheds, plots and Land) Rules, 1974. (for short ''the Rules, 1974''). The Rules, 1974 has been adapted by the State of Chhattisgarh also.

It is indisputable that the petitioner could not implement the project and commence production within the specified period from the date of taking over possession of the plot. The petitioner was duly noticed on 18.09.2001 (Annexure R/1-1) in this regard by the respondent No. 1 upon which the petitioner by communication dated 29.09.2001 (Annexure R/1-2) assured that the production would commence from the last week of November, 2001. Thereafter, by letter dated 15.10.2001 (Annexure R/1-3) the petitioner was again asked to commence production. Instead of commencing production in his unit, the petitioner again requested for extension of six months time by communication dated 15.11.2001 (Annexure R/1-4) which was accepted by the respondent No. 1 by letter dated 20.12.2001 (Annexure R/1-5). Similar notice of the aforesaid nature was issued to the petitioner on 29.05.2003 (Annexure R/1-6) also upon which the petitioner took the stand that since there was less demand of coal briquettes, therefore, now he wanted to start manufacture of cement pole, pot and jaali and the informed the respondent No. 1 by letter dated 24.06.2003 (Annexure R/1-7). Another communication dated 16.07.2003 (Annexure R/1-8) was made to the petitioner by the respondent No. 1 asking the petitioner to produce proof regarding commencement of the production. Similar letters dated 01.04.2004, 04.02.2005 and 02.09.2005 (Annexure R/1-10, 11 and 12) were sent to the petitioner warning him that if does not produce any proof with regard to commencement of production, the lease agreement would be cancelled. The petitioner, in turn again requested for grant of extension for one more year by letter dated 25.07.2003 (Annexure R/1-9). Further, by letter dated 06.12.2005 (Annexure R/1-13) informed the respondent No. 1 that since the coal briquettes business was not a profitable business, therefore he wanted to start a cement related business. He also requested to cancel the above notices. Ultimately, the cancellation order dated 10.02.2006 was passed terminating the lease deed.

It is also not in dispute that against the said order, the petitioner preferred an appeal before the Chairman of the respondent No. 1 on 27.02.2006 (Annexure R/1-15). The appeal of the petitioner was allowed and was granted six months time to commence the production. It was further made clear in the order dated 28.07.2006 (Annexure R/1-16) that if the petitioner does not commence production within the further period of six months, the order dated 10.02.2006 shall become operative.

The petitioner was again sent notices to handover the possession on 26.4.2007 (Annexure-P/7), 20.9.2007 (Annexure-P/9) and 7.4.2008 (Annexure-P/10) specifying that the possession of the land in question be returned back within a period of three months. The petitioner failed to do the needful rather paid lease rent on 10.3.2008. Thus, the final decision to take over possession of the plot in question was taken. Needless to mention that the petitioner''s lease was terminated on 10.2.2006 (Annexure-R1/14). There against, the decision of the Chairman in appeal was conveyed to the petitioner on 28.7.2006 (Annexure-R1/16) informing that the appellate authority had further granted six months time to commence the production failing which it was held that the order of cancellation dated 10.2.2006 would become operative. The petitioner has not taken any steps and, as such, the lease was rightly cancelled and possession was rightly taken over.

The grant of lease deed for the purpose of industrial development by the respondent No. 1 is governed under the Rules, 1974. Rule 21, ibid; clearly provides that if the lessee or transferee or assignee commits any breach of any of the conditions specified in the lease deed then the allotting authority shall give notice in writing to the lessee/transferee/assignee as the case may be asking him to remedy the breach within 60 days from the date of the notice and if the breach is not remedied within such period, the allotting authority may determine the lease provided that nothing herein contained shall debar the State Government from enforcing any other right or remedy that the State Government may have against the lessee/transferee/assignee under any other provisions herein contained.

It is not in dispute that the petitioner was granted extension of time from time to time. Even the appellate authority by its order dated 28.7.2006 granted further six months time to remedy breach of the conditions of the agreement by commencing the production. The petitioner failed to do the same.

Contention of Shri Nair is that the provisions of Section 111 of the Transfer of Property Act, 1882 (for short "the TP Act, 1882") will be applicable, which provides for determination of lease. The conditions prescribed u/s 111 of the TP Act, 1882 would not be applicable to the facts of the present case. The TP Act, 1882 is applicable only in case of transfer of property by act of parties.

Section 5 of the TP Act, 1882 defines the ''transfer of property'', wherein it is clearly provided that nothing herein contained shall affect any law for the time being in force relating to transfer of property.

In the case on hand, apart from the agreement, allotment of the law and the termination of lease is governed under the provisions of Rule 21 of the Rules, 1974. Thus, the contention of Shri Nair, as above-stated, is rejected.

The Supreme Court in Bharat Petroleum Corporation Ltd. Vs. P. Kesavan and Another, observed that the provisions of the Transfer of Property Act have no application in a case where as transfer of property takes place by operation of law. A transfer which takes place by operation law, therefore, need not meet the requirement of the provisions of the Transfer of Property Act or Indian Registration Act.

It is a trite law that the contracting parties to the agreement are governed by the terms and conditions of the agreement and in case of breach of terms and conditions, consequence as provided under the agreement would entail.

In the case on hand, the plot in question was allotted in favour of the respondent No. 2 by order dated 10.1.2011 (Annexure-R2/1). Letter of intent was issued in favour of the respondent No. 2 on 16.12.2010 (Annexure-R2/1) and thereafter, the lease deed was executed on 19.1.2011 (Annexure-R2/3) between the respondent No. 1 and the respondent No. 2. The possession was handed over on 21.2.2011 (Annexure-R2/4). The petitioner has filed this petition on 28.3.2011.

In view of the above analysis and the facts and circumstances of the case, there is no merit in the writ petition and, as such, the same is hereby dismissed. No order as to costs.